The EU Parliament and Council recently reached an agreement on the Corporate Sustainability Due Diligence Directive (CSDDD), a big step forward for the legislation. This is a landmark directive which will increase the level of due diligence corporates must implement to protect human rights and environmental adverse impacts.
A summary of the main points:
New duties and measures for companies
The directive would oblige companies to identify, assess, cease or mitigate, and remedy harm they have caused, contributed to, or are directly linked to in their value chains. It would also introduce monetary sanctions, complaint mechanisms, and access to justice measures for victims of corporate abuse.
Gaps in alignment with the OECD Guidelines
The text of the directive references OECD guidelines falls short of alignment with the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct, especially on the coverage of the financial sector, the duties on climate impacts, and the scope of downstream impacts.
Next steps and reactions
The directive is a first step, but more action is needed by governments to ensure policy coherence and accountability for corporate harms. OECD Watch in particular welcomed the agreement but called for stronger implementation of the OECD Guidelines and alignment of the directive with the international standards. There is also widespread disappointment that the inclusion of the financial services sector is limited to their own operations initially, with further reviews expected to extend their obligations to their entire value chain. After the agreement, the directive will now go to the EU Parliament in 2024 for adoption as a delegated act.
This directive follows close behind the recently adopted CSRD, which requires companies to report accurately on their sustainability related topics, including environmental and social impacts, including human rights. CSDDD will take the responsibility further, defining the actions businesses need to take, the results of which will then be reported through CSRD. These policies are all contributing to the EU Green Deal, designed to build resilience in the EU market and for a more sustainable economy.
